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Recent Study: Central America Infrastructure Report Q2 2013

Recently published research from Business Monitor International, "Central America Infrastructure Report Q2 2013", is now available at Fast Market Research


Boston, MA -- (SBWIRE) -- 05/30/2013 -- BMI View: The Central America region as a whole remains small in scale, with combined industry value of just US$9.3bn estimated for 2012. With that in mind, the high risks and small scale make the region broadly unattractive for new companies who do not have existing operations in the region or surrounding areas to leverage off. That said, we do see strong growth in a number of sectors, including social housing, renewables and hydropower, gas conversion, and airports and ports.

Central America presents a broad range of opportunities across the infrastructure and wider construction sectors as infrastructure deficits across the region are addressed. However, it also poses significant risks. Home to deep-run corruption, high crime rates and unsophisticated institutions, the generally small industry sizes offer little to make those risks palatable. However, we do see sporadic growth opportunities, and highlight Panama, Costa Rica and Nicaragua as outperformers.

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Domestically, there is insufficient capacity and technical ability to support the complex projects being developed across the region. Those best placed to capitalise will be regional players, which have the ability to build on proximity to market to access contracts. Some of the highest potential is offered to the large construction players in Mexico and Brazil (such as ICA and Odebrecht). We also see a growing Chinese presence in the region, especially in Costa Rica. High-risk tolerance and the ability to secure cheap and abundant capital have seen Chinese companies make a dent in the region; Sinohydro, for example, is active in a number of power projects.

Some of the first movers into the region have been Spanish companies, which are capitalising on cultural ties to incorporate Central America into their successful and broad international expansion plans. Many of the Spanish companies are building on their existing presence in Mexico or the southern United States to access the Central America market, with Acciona and Iberdrola both having a presence. We see little potential for the other European majors to target the region, given the limited scale and cost of establishing operations.

These companies are finding opportunities across a wide range of sectors. Social infrastructure is a significant growth area as the region's governments seek to address the wide housing deficits. At the same time, economic infrastructure is being built up to cater for the ongoing expansion of the Panama Canal, including new ports in the region, as well as an ambitious plan to build a rival canal in Nicaragua. Building up electricity generating capacity is also seeing growth, as companies seek to capitalise on the region's indigenous and lucrative renewable resources, as well as providing electricity to support industrial growth.

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